Avnet, Inc.
AVNET INC (Form: 8-K, Received: 01/26/2017 07:06:13)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

__________________

Date of Report (Date of earliest event reported)     January 26, 2017

AVNET, INC.
(Exact name of registrant as specified in its charter)

 

 

 

 

 

New York  

 

1-4224

 

11-1890605

(State or other jurisdiction

 

(Commission

 

(IRS Employer

Of incorporation)

 

File Number)

 

Identification No.)

 

 

2211 South 47th Street,  Phoenix,  Arizona  

 

85034

(Address of principal executive offices)

 

(Zip Code)

(480) 643-2000

(Registrant’s telephone number, including area code.)

N/A

(Former name and former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 


 

Item 2.02. Results of Operations and Financial Condition.

 

On January 26, 2017, Avnet, Inc. (the “Company”) issued a press release announcing its second quarter results of operations for fiscal 2017.  A copy of the press release is attached hereto as Exhibit 99.1.  A discussion on the impact of foreign currency on the Company’s results of operations, the definition of organic sales and a reconciliation of non-GAAP financial information is attached hereto as Exhibit 99.2.  Each exhibit is incorporated by reference herein.

 

The information in this Current Report on Form 8-K and the exhibits attached hereto are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933 except as shall be expressly set forth in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following materials are attached as exhibits to this Current Report on Form 8-K:

 

 

 

 

Exhibit
Number

   

Description

 

 

 

99.1

 

Press Release, dated January 26, 2017.

99.2

 

Supplemental and Non-GAAP Financial Information.  

 

 

2


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

Date: January 26, 2017

 

AVNET, INC.

 

 

Registrant

 

 

 

 

 

By:

 

/s/ Kevin Moriarty

 

 

 

 

Name: Kevin Moriarty

 

 

 

 

Title: Senior Vice President and

 

 

 

 

Chief Financial Officer

 

3


 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

Avnet, Inc.

2211 South 47th Street

Phoenix, AZ 85034

PRESS RELEASE

 

 

 

Avnet Reports Second Quarter Fiscal Year 2017 Results

Acquisitions Accelerate Digital Transformation

 

Phoenix, January 26, 2017 - Avnet, Inc. (NYSE:AVT) today announced results for the second quarter fiscal year 2017 ended December 31, 2016.

 

Highlights

 

·

Diluted earnings per share of $0.79

o

Adjusted diluted EPS from continuing operations of $0.77 exceeded the midpoint of expectations

·

Premier Farnell sales exceeded expectations and contributed to margin expansion

·

Cash generated from operations in the second quarter of fiscal 2017 was $240 million

·

Acquired Hackster.io, strengthening digital platform and reach into early lifecycle customers

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarters Ended

 

 

    

December 31, 2016

    

January 2, 2016

    

Change

 

Continuing Operations (1)

 

$ in millions, except per share data

 

Sales (2)

 

$

4,273.6

 

$

4,161.1

 

2.7

%

Constant Currency (3)

 

 

 

 

 

 

 

3.4

%

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

124.2

 

 

136.1

 

(8.7)

%

Adjusted Operating Income (4)

 

 

164.5

 

 

152.5

 

7.9

%

 

 

 

 

 

 

 

 

 

 

Income

 

 

32.5

 

 

102.1

 

(68.2)

%

Adjusted Income (4)

 

 

100.8

 

 

101.3

 

(0.4)

%

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$

0.25

 

$

0.76

 

(67.1)

%

Adjusted Diluted EPS (4)

 

$

0.77

 

$

0.75

 

2.7

%

 

 

 

 

 

 

 

 

 

 

Avnet

 

 

 

 

 

 

 

 

 

Diluted EPS 

 

 

0.79

 

 

1.16

 

(31.9)

%

Adjusted Diluted EPS (4)

 

 

1.19

 

 

1.22

 

(2.5)

%


(1)

The information included under “Continuing Operations” excludes the Technology Solutions (TS) business as TS is considered a discontinued operation.  See “Discontinued Operations,” below.

(2)

Sales in the fiscal quarter-ended December 31, 2016, excludes approximately $92 million of embedded computing solutions business, which was included in second quarter sales guidance, but is now part of discontinued operations.

(3)

Year-over-year sales growth rate excludes the impact of changes in foreign currency exchange rates. A discussion on the impact of foreign currency on Avnet results of operations, the definition of organic sales and a reconciliation of non-GAAP financial information is included in Exhibit 99.2.

(4)

Non-GAAP measures. See the reconciliation of non-GAAP financial information attached as exhibit 99.2 to the Form 8-K filed with the Securities Exchange Commission on January 26, 2017 (“Exhibit 99.2”).

 

 

 


 

 

“Our December quarter results validate the benefits of our acquisition of Premier Farnell, which was effective October 17, 2016, as gross profit and adjusted operating margins increased 158 and 18 basis points, respectively, year over year.  More importantly, as we integrate Premier Farnell, the team is excited about the opportunities to accelerate revenue growth as their customer base gains access to the engineering resources and supply chain services of Avnet,” said Bill Amelio, CEO of Avnet. “During the quarter, we further enhanced our digital platform with the acquisition of Hackster.io, which provides over 200,000 makers a forum to learn how to design, create and program Internet-connected hardware.  Our Electronics Marketing business also performed well as organic revenue grew approximately 4% in constant currency when you exclude the impact of Premier Farnell and our decision to exit select high volume supply chain engagements in Asia.”

 

Avnet (Electronics Marketing Continuing Operations) Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-over-Year Growth Rates

 

 

 

Q2 FY17

 

Reported

 

 

Organic

 

 

    

Sales

    

Sales

  

    

Sales

  

 

 

 

(in millions)

 

 

 

 

 

 

 

EM Total

 

$

4,273.6

 

 

2.7

%

 

(3.6)

%

Constant Currency (1)

 

 

 

 

 

3.4

%

 

(2.9)

%

Americas

 

$

1,252.6

 

 

7.5

%

 

(2.1)

%

EMEA

 

$

1,380.7

 

 

21.0

%

 

8.4

%

Constant Currency (1)

 

 

 

 

 

24.6

%

 

11.6

%

Asia

 

$

1,640.3

 

 

(11.5)

%

 

(12.9)

%

Constant Currency (1)

 

 

 

 

 

(12.2)

%

 

(13.5)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Q2 FY17

    

Q2 FY16

    

Change

Operating Income

 

$

190.7

 

 

$

176.3

 

 

8.2

%

Operating Income Margin

 

 

4.5

%

 

 

4.2

%

 

23

bps


(1)

Refer to Exhibit 99.2. 

 

·

Sales increased 3.4% from the year ago quarter in constant currency

o

Organic sales declined 2.9% in constant currency

·

EMEA sales increased 11.6% year over year in constant currency, representing the 14 th consecutive quarter of organic growth

·

Gross profit margin increased 158 basis points from the year ago quarter primarily due to the addition of Premier Farnell, as well as improvements in the Asia region

·

Operating income margin increased 23 basis points from the year ago quarter due to the addition of Premier Farnell, as well as improvements in the EMEA and Asia regions, which were partially offset by a decline in the Americas region as a result of ERP implementation costs

·

Working capital (defined as receivables plus inventories less accounts payables) increased 2.3% sequentially due to the addition of Premier Farnell.  Excluding the impact of Premier Farnell, working capital declined 9.7% sequentially, with approximately two-thirds of the decline in the Americas region 

 

 


 

 

Cash Flow and Returns to Shareholders

 

·

Trailing twelve months cash flow from operations increased $122 million sequentially to $380 million

·

Cash and cash equivalents at the end of the quarter was $1.27 billion; net debt (total debt less cash and cash equivalents) was $2.36 billion

·

Avnet has $174.9 million remaining under the current share repurchase authorization

·

Avnet paid a dividend of $0.17 per share or $21.8 million during the quarter

 

“On October 17 th we used approximately $180 million of our offshore cash and $660 million of new debt to fund the acquisition of Premier Farnell.  Subsequent to that event, we issued $300 million of 5-year notes at a rate of 3.75%. A portion of the proceeds was used to pay down acquired Premier Farnell debt while the remainder was used to pay down floating-rate debt,” said Kevin Moriarty, CFO of Avnet. “We intend to use approximately $1.5 billion of the proceeds from the sale of Technology Solutions to further reduce our floating-rate debt to ensure our credit statistics solidly support our investment grade credit rating.  With our strong cash flow from operations, which totaled $380 million over the trailing twelve months, and no long-term note repayments until 2020, we are in a strong position to fund future growth and consider ways to return additional cash to shareholders.”

 

Outlook for Third Quarter of Fiscal 2017 Ending on April 1, 201 7

 

·

Avnet outlook only includes the EM business, including Premier Farnell

·

Sales are expected to be in the range of $4.3 billion to $4.6 billion

·

Adjusted diluted earnings per share is expected to be in the range of $0.80 to $0.90 per share

·

The guidance assumes 130 million average diluted shares outstanding and an adjusted tax rate of 23% to 27%

 

The above guidance excludes any additional acquisitions, the amortization of intangibles, any potential restructuring, integration and other expenses and certain income tax adjustments. The above guidance also excludes any results from the TS business. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate for the third quarter of fiscal 2017 is $1.07 to €1.00.  This compares with an average exchange rate of $1.10 to the Euro in the third quarter of fiscal 2016.

 

Refer to Exhibit 99.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2017, for a reconciliation of non-GAAP guidance.

 

Discontinued Operations

 

On September 19, 2016, Avnet announced that it had entered into an agreement to sell its TS business to Tech Data Corporation.  The transaction is subject to customary closing conditions and regulatory approvals and is expected to close by the end of fiscal 2017.  As a result of the pending sale and having met applicable accounting requirements, Avnet began reporting the TS business as a discontinued operation in the first quarter of fiscal 2017 and prior periods have been adjusted for comparability.

 

 


 

 

  Forward-Looking Statements

 

This document contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on management’s current expectations and are subject to uncertainty and changes in facts and circumstances. The forward-looking statements herein include statements addressing future financial and operating results of Avnet and may include words such as “will,” “anticipate,” “intend,” “estimate,” “forecast,” “expect,” “feel,” “believe,” “should,” and other words and terms of similar meaning in connection with any discussions of future operating or financial performance, business prospects or market conditions. Actual results may differ materially from the expectations contained in the forward-looking statements.

 

The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: Avnet’s ability to retain and grow market share and to generate additional cash flow, risks associated with any acquisition activities and the successful integration of acquired companies, the separation and pending sale of the TS business, an industry down-cycle in semiconductors, IT hardware or software products, declines in sales, changes in business conditions and the economy in general, changes in market demand and pricing pressures, any material changes in the allocation of product or product rebates by suppliers, and other competitive and/or regulatory factors affecting the businesses of Avnet generally.

 

More detailed information about these and other factors is set forth in Avnet’s filings with the Securities and Exchange Commission, including Avnet’s reports on Form 10-K, Form 10-Q and Form 8-K. Except as required by law, Avnet is under no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Teleconference and Upcoming Events

 

Avnet will host a quarterly teleconference today at 10:00 a.m. Eastern Time. Financial information including financial statement reconciliations of GAAP to non-GAAP financial measures, will be available through www.ir.avnet.com. Please log onto the site 15 minutes prior to the start of the event to register or download any necessary software. An archive copy of the teleconference will also be available after the call.

 

For a listing of Avnet’s upcoming events and other information, please visit Avnet’s investor relations website at www.ir.avnet.com.

 

 

 

 


 

 

About Avnet

 

From components to cloud and from design to disposal, Avnet, Inc. (NYSE: AVT) accelerates the success of customers who build, sell and use technology by providing a comprehensive portfolio of innovative products, services and solutions. For more information, visit www.avnet.com.  (AVT_IR)

 

Visit the Avnet Investor Relations website at www.ir.avnet.com or contact us at investorrelations@avnet.com.

 

Investor Relations Contact

 

Avnet, Inc.

Vincent Keenan

Investor Relations

(480) 643-7053

investorrelations@avnet.com  

 

Media Relations Contact

 

Maureen O’Leary

Corporate Communications

480-643-7499

maureen.o’leary@avnet.com

 

 


 

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarters Ended

 

Six Months Ended

 

 

    

December 31,

    

January 2,

    

December 31,

    

January 2,

 

 

 

2016

 

2016

 

2016

 

2016

 

 

 

(Thousands, except per share data)

 

Sales

 

$

4,273,559

 

$

4,161,082

 

$

8,391,663

 

$

8,689,667

 

Cost of sales

 

 

3,687,374

 

 

3,656,024

 

 

7,282,823

 

 

7,628,440

 

Gross profit

 

 

586,185

 

 

505,058

 

 

1,108,840

 

 

1,061,227

 

Selling, general and administrative expenses

 

 

431,555

 

 

354,858

 

 

795,227

 

 

731,918

 

Restructuring, integration and other expenses

 

 

30,400

 

 

14,083

 

 

59,869

 

 

26,601

 

Operating income

 

 

124,230

 

 

136,117

 

 

253,744

 

 

302,708

 

Other expense, net

 

 

(36,514)

 

 

(2,052)

 

 

(50,248)

 

 

(1,169)

 

Interest expense

 

 

(26,748)

 

 

(20,965)

 

 

(53,984)

 

 

(42,997)

 

Income from continuing operations before income taxes

 

 

60,968

 

 

113,100

 

 

149,512

 

 

258,542

 

Income tax expense

 

 

28,503

 

 

10,959

 

 

49,359

 

 

47,477

 

Income from continuing operations

 

 

32,465

 

 

102,141

 

 

100,153

 

 

211,065

 

Income from discontinued operations

 

 

70,753

 

 

53,871

 

 

71,908

 

 

75,201

 

Net income

 

$

103,218

 

$

156,012

 

$

172,061

 

$

286,266

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.25

 

$

0.77

 

$

0.78

 

$

1.59

 

Discontinued operations

 

 

0.55

 

 

0.41

 

 

0.56

 

 

0.56

 

Net income per share - basic

 

$

0.80

 

$

1.18

 

$

1.34

 

$

2.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.25

 

$

0.76

 

$

0.77

 

$

1.56

 

Discontinued operations

 

 

0.54

 

 

0.40

 

 

0.55

 

 

0.55

 

Net income per share - diluted

 

$

0.79

 

$

1.16

 

$

1.32

 

$

2.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used to compute earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

127,901

 

 

131,909

 

 

127,716

 

 

132,846

 

Diluted

 

 

130,347

 

 

134,918

 

 

130,055

 

 

135,622

 

Cash dividends paid per common share

 

$

0.17

 

$

0.17

 

$

0.34

 

$

0.34

 

 

 


 

 

AVNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

    

December 31,

    

July 2,

 

 

 

2016

 

2016

 

 

 

(Thousands)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,270,142

 

$

1,031,478

 

Receivables, net

 

 

2,996,110

 

 

2,769,906

 

Inventories

 

 

2,697,796

 

 

2,559,921

 

Prepaid and other current assets

 

 

59,564

 

 

81,197

 

Assets held for sale

 

 

4,053,487

 

 

2,561,471

 

Total current assets

 

 

11,077,099

 

 

9,003,973

 

Property, plant and equipment, net

 

 

565,108

 

 

453,209

 

Goodwill

 

 

1,098,471

 

 

621,852

 

Intangible assets, net

 

 

296,058

 

 

22,571

 

Other assets

 

 

219,259

 

 

239,133

 

Non-current assets held for sale

 

 

 —

 

 

899,067

 

Total assets

 

$

13,255,995

 

$

11,239,805

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Short-term debt

 

$

246,729

 

$

1,152,599

 

Accounts payable

 

 

1,774,021

 

 

1,590,777

 

Accrued expenses and other

 

 

456,397

 

 

394,888

 

Liabilities held for sale

 

 

2,332,646

 

 

1,804,229

 

Total current liabilities

 

 

4,809,793

 

 

4,942,493

 

Long-term debt

 

 

3,382,431

 

 

1,339,204

 

Other liabilities

 

 

351,909

 

 

223,053

 

Non-current liabilities held for sale

 

 

 —

 

 

43,769

 

Total liabilities

 

 

8,544,133

 

 

6,548,519

 

Shareholders’ equity

 

 

4,711,862

 

 

4,691,286

 

Total liabilities and shareholders’ equity

 

$

13,255,995

 

$

11,239,805

 

 

 


 

 

AVNET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

    

December 31,

    

January 2,

 

 

 

2016

 

2016

 

 

 

(Thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

172,061

 

$

286,266

 

Less: Income from discontinued operations, net of tax

 

 

71,908

 

 

75,201

 

Income from continuing operations

 

 

100,153

 

 

211,065

 

 

 

 

 

 

 

 

 

Non-cash and other reconciling items:

 

 

 

 

 

 

 

Depreciation

 

 

45,616

 

 

33,991

 

Amortization

 

 

11,759

 

 

4,034

 

Deferred income taxes

 

 

9,312

 

 

(708)

 

Stock-based compensation

 

 

32,525

 

 

38,424

 

Other, net

 

 

13,069

 

 

18,240

 

Changes in (net of effects from businesses acquired):

 

 

 

 

 

 

 

Receivables

 

 

(127,153)

 

 

261,855

 

Inventories

 

 

139,672

 

 

(189,595)

 

Accounts payable

 

 

133,698

 

 

(240,474)

 

Accrued expenses and other, net

 

 

(55,437)

 

 

(66,251)

 

Net cash flows provided by operating activities - continuing operations

 

 

303,214

 

 

70,581

 

Net cash flows (used) provided by operating activities - discontinued operations

 

 

(63,124)

 

 

13,661

 

Net cash flows provided by operating activities

 

 

240,090

 

 

84,242

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Issuance of notes, net of issuance costs

 

 

296,374

 

 

 —

 

Repayments of notes

 

 

(378,559)

 

 

(250,000)

 

Borrowings (repayments) under accounts receivable securitization, net

 

 

(264,963)

 

 

39,972

 

Borrowings of bank and revolving debt, net

 

 

752,196

 

 

417,982

 

Borrowings under term loans

 

 

530,756

 

 

 —

 

Repurchases of common stock

 

 

 —

 

 

(184,704)

 

Dividends paid on common stock

 

 

(43,426)

 

 

(45,020)

 

Other, net

 

 

13,825

 

 

(1,080)

 

Net cash flows provided (used) for financing activities - continuing operations

 

 

906,203

 

 

(22,850)

 

Net cash flows provided (used) for financing activities - discontinued operations

 

 

(16,505)

 

 

26,389

 

Net cash flows provided by financing activities

 

 

889,698

 

 

3,539

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(70,424)

 

 

(74,392)

 

Acquisitions of businesses, net of cash acquired

 

 

(798,366)

 

 

 —

 

Other, net

 

 

7,766

 

 

9,111

 

Net cash flows used for investing activities - continuing operations

 

 

(861,024)

 

 

(65,281)

 

Net cash flows used for investing activities - discontinued operations

 

 

(3,093)

 

 

(20,988)

 

Net cash flows used for investing activities

 

 

(864,117)

 

 

(86,269)

 

 

 

 

 

 

 

 

 

Effect of currency exchange rate changes on cash and cash equivalents

 

 

(27,007)

 

 

(17,977)

 

Net change in cash and cash equivalents

 

 

238,664

 

 

(16,465)

 

Cash and cash equivalents at beginning of period

 

 

1,031,478

 

 

932,553

 

Cash and cash equivalents at end of period

 

$

1,270,142

 

$

916,088

 

 


 

 

 

 

AVNET, INC.

SEGMENT INFORMATION

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarters Ended

 

Six Months Ended

 

 

    

December 31,

    

January 2,

    

December 31,

    

January 2,

 

 

 

2016

 

2016*

 

2016*

 

2016

 

 

 

(Millions)

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Electronics Marketing (continuing operations)

 

$

4,273.6

 

$

4,161.1

 

$

8,391.7

 

$

8,689.7

 

Technology Solutions (discontinued operations)

 

 

2,453.3

 

 

2,687.0

 

 

4,375.5

 

 

5,128.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Electronics Marketing (continuing operations)

 

$

190.7

 

$

176.3

 

$

375.7

 

$

389.3

 

Technology Solutions (discontinued operations)

 

 

103.2

 

 

115.1

 

 

147.4

 

 

189.6

 

Corporate - continuing operations

 

 

(26.2)

 

 

(23.8)

 

 

(49.8)

 

 

(55.9)

 

Corporate - discontinued operations

 

 

(14.4)

 

 

(12.3)

 

 

(26.9)

 

 

(27.4)

 

Held for sale depreciation elimination - discontinued operations

 

 

6.8

 

 

 —

 

 

6.8

 

 

 —

 

 

 

 

260.1

 

 

255.3

 

 

453.2

 

 

495.7

 

Restructuring, integration and other expenses - continuing operations

 

 

(30.4)

 

 

(14.1)

 

 

(59.9)

 

 

(26.6)

 

Restructuring, integration and other expenses - discontinued operations

 

 

(3.3)

 

 

(7.1)

 

 

(7.5)

 

 

(20.6)

 

Amortization of acquired intangible assets and other - continuing operations

 

 

(9.8)

 

 

(2.3)

 

 

(12.2)

 

 

(5.1)

 

Amortization of acquired intangible assets and other - discontinued operations

 

 

 —

 

 

(5.6)

 

 

(4.5)

 

 

(10.3)

 

Less: TS discontinued operations

 

 

(92.4)

 

 

(90.0)

 

 

(115.4)

 

 

(130.4)

 

Operating Income

 

$

124.2

 

$

136.1

 

$

253.7

 

$

302.7

 


* Sub-totals and totals may not foot due to rounding

 


 

Exhibit 99.2

 

Supplemental and Non-GAAP Financial Information

 

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company also discloses certain non-GAAP financial information including (i) adjusted operating income, (ii) adjusted operating expenses, (iii) adjusted other expense, (iv) adjusted income tax expense, (v) adjusted net income, (vi) adjusted diluted earnings per share, and (vii) sales adjusted for the impact of acquisitions and other items (as defined in the Organic Sales section of this document). There are also references to the impact of foreign currency in the discussion of the Company’s results of operations. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens and the weaker exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion of the Company’s results of operations, results excluding this impact are referred to as “excluding the impact of changes in foreign currency exchange rates” or “constant currency.” Management believes organic sales and sales in constant currency are useful measures for evaluating current period performance as compared with prior periods and for understanding underlying trends. In order to determine the translation impact of changes in foreign currency exchange rates on sales, income or expense items for subsidiaries reporting in currencies other than the U.S. Dollar, the Company adjusts the average exchange rates used in current periods to be consistent with the average exchange rates in effect during the comparative period.

 

Management believes that operating income, operating expenses and other expense adjusted for restructuring, integration and other expenses, including acquisition or divestiture related costs and amortization of acquired intangible assets and other, are useful measures to help investors better assess and understand the Company’s operating performance. This is especially the case when comparing results with previous periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of Avnet’s normal operating results or non-cash in nature. Management analyzes operating income, operating expenses and other expenses without the impact of these items as an indicator of ongoing margin performance and underlying trends in the business. Management also uses these non-GAAP measures to establish operational goals and, in many cases, for measuring performance for compensation purposes.

 

Additional non-GAAP metrics management uses are adjusted operating income margin, which is defined as adjusted operating income (as defined above) divided by sales and adjusted operating expense to gross profit ratio, which is defined as adjusted operating expenses (as defined above) divided by gross profit.

 

Management also believes income tax expense, net income and diluted EPS adjusted for the impact of the items described above and certain items impacting income tax expense are useful to investors because they provide a measure of the Company’s net profitability on a more comparable basis to historical periods and provide a more meaningful basis for forecasting future performance. Additionally, because of management’s focus on generating shareholder value, of which net profitability is a primary driver, management believes net income and diluted EPS excluding the impact of these items provides an important measure of the Company’s net profitability for the investing public.

 

 


 

 

Other metrics management monitors in its assessment of business performance include return on working capital (ROWC), return on capital employed (ROCE) and working capital velocity (WC velocity).

 

·

ROWC is defined as annualized adjusted operating income (as defined above) divided by the sum of the monthly average balances of receivables and inventories less accounts payable from both continuing and discontinued operations.

 

·

ROCE is defined as annualized, tax effected adjusted operating income (as defined above) divided by the monthly average balances of interest-bearing debt and equity (including the impact of adjustments to operating income discussed above) less cash and cash equivalents from both continuing and discontinued operations.

 

·

WC velocity is defined as annualized adjusted sales divided by the sum of the monthly average balances of receivables and inventories less accounts payable from both continuing and discontinued operations.

 

Any analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, results presented in accordance with GAAP.

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended

 

 

 

    

December 31,

    

January 2,

 

 

 

 

2016*

 

2016*

 

 

 

 

$ in thousands, except per share amounts

 

 

 

 

 

 

 

 

 

 

GAAP selling, general and administrative expenses - continuing operations

 

 

$

431,555

 

$

354,858

 

Amortization of intangible assets and other - continuing operations

 

 

 

(9,829)

 

 

(2,272)

 

Adjusted operating expenses - continuing operations

 

 

 

421,725

 

 

352,586

 

 

 

 

 

 

 

 

 

 

GAAP operating income - continuing operations

 

 

$

124,230

 

$

136,117

 

Restructuring, integration and other expenses- continuing operations

 

 

 

30,400

 

 

14,083

 

Amortization of intangible assets and other - continuing operations

 

 

 

9,829

 

 

2,272

 

Adjusted operating income - continuing operations

 

 

 

164,459

 

 

152,472

 

 

 

 

 

 

 

 

 

 

GAAP operating income - discontinued operations

 

 

$

92,355

 

$

89,998

 

Restructuring, integration and other expenses- discontinued operations

 

 

 

3,316

 

 

7,139

 

Amortization of intangible assets and other - discontinued operations

 

 

 

 -

 

 

5,649

 

Adjusted operating income  - discontinued operations

 

 

 

95,671

 

 

102,786

 

 

 

 

 

 

 

 

 

 

Adjusted operating income

 

 

$

260,130

 

$

255,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP other expenses, net - continuing operations

 

 

$

36,514

 

$

2,052

 

Acquisition related FX hedging and financing costs - continuing operations

 

 

 

(32,700)

 

 

 -

 

Adjusted other expenses, net - continuing operations

 

 

 

3,814

 

 

2,052

 

 

 

 

 

 

 

 

 

 

GAAP income tax expense - continuing operations

 

 

$

28,503

 

$

10,959

 

Restructuring, integration and other expenses  - continuing operations

 

 

 

7,378

 

 

4,570

 

Amortization of intangible assets and other - continuing operations

 

 

 

2,342

 

 

618

 

Acquisition related FX hedging and financing costs - continuing operations

 

 

 

4,230

 

 

 -

 

Discrete income tax expense items - continuing operations

 

 

 

(9,369)

 

 

12,048

 

Adjusted income tax expense - continuing operations

 

 

 

33,084

 

 

28,195

 

 

 

 

 

 

 

 

 

 

 


 

 

GAAP income tax expense - discontinued operations

 

 

$

10,967

 

$

30,236

 

Restructuring, integration and other expenses - discontinued operations

 

 

 

2,634

 

 

2,426

 

Amortization of intangible assets and other - discontinued operations

 

 

 

 -

 

 

1,921

 

Discrete income tax expense items - discontinued operations

 

 

 

16,609

 

 

(754)

 

Adjusted income tax expense - discontinued operations

 

 

 

30,210

 

 

33,829

 

 

 

 

 

 

 

 

 

 

GAAP income - continuing operations

 

 

$

32,465

 

$

102,141

 

Restructuring, integration and other expenses (net of tax) - continuing operations

 

 

 

23,022

 

 

9,513

 

Amortization of intangible assets and other (net of tax) - continuing operations

 

 

 

7,487

 

 

1,654

 

Acquisition related FX hedging and financing costs (net of tax) - continuing operations

 

 

 

28,470

 

 

 -

 

Discrete income tax expense items - continuing operations

 

 

 

9,369

 

 

(12,048)

 

Adjusted income - continuing operations

 

 

 

100,813

 

 

101,260

 

 

 

 

 

 

 

 

 

 

GAAP income - discontinued operations

 

 

$

70,753

 

$

53,871

 

Restructuring, integration and other expenses (net of tax) - discontinued operations

 

 

 

682

 

 

4,714

 

Amortization of intangible assets and other (net of tax) - discontinued operations

 

 

 

 -

 

 

3,728

 

Discrete income tax expense items - discontinued operations

 

 

 

(16,609)

 

 

753

 

Adjusted income - discontinued operations

 

 

 

54,827

 

 

63,066

 

 

 

 

 

 

 

 

 

 

Adjusted net income

 

 

$

155,640

 

$

164,326

 

 

 

 

 

 

 

 

 

 

GAAP diluted EPS - continuing operations

 

 

$

0.25

 

$

0.76

 

Restructuring, integration and other expenses (net of tax) - continuing operations

 

 

 

0.18

 

 

0.07

 

Amortization of intangible assets and other (net of tax) - continuing operations

 

 

 

0.06

 

 

0.01

 

Acquisition related FX hedging and financing costs (net of tax) - continuing operations

 

 

 

0.22

 

 

 -

 

Discrete income tax expense items - continuing operations

 

 

 

0.07

 

 

(0.09)

 

Adjusted diluted EPS - continuing operations

 

 

 

0.77

 

 

0.75

 

 

 

 

 

 

 

 

 

 

GAAP diluted EPS  - discontinued operations

 

 

$

0.54

 

$

0.40

 

Restructuring, integration and other expenses (net of tax) - discontinued operations

 

 

 

0.01

 

 

0.03

 

Amortization of intangible assets and other (net of tax) - discontinued operations

 

 

 

 -

 

 

0.03

 

Discrete income tax expense items - discontinued operations

 

 

 

(0.13)

 

 

0.01

 

Adjusted diluted EPS - discontinued operations

 

 

 

0.42

 

 

0.47

 

 

 

 

 

 

 

 

 

 

Adjusted diluted EPS

 

 

$

1.19

 

$

1.22

 

* May not foot due to rounding

 

 

Organic Sales

 

Organic sales is defined as sales adjusted for the impact of significant acquisitions, divestitures and other items by adjusting Avnet’s prior and current (if necessary) periods to include the sales of acquired businesses and exclude the sales of divested businesses as if the acquisitions and divestitures had occurred at the beginning of the earliest period presented. Organic sales in constant currency is defined as organic sales (as defined above) excluding the impact of changes in foreign currency exchange rates.

 

The following tables present the reconciliation of reported sales to organic sales for the second quarters and first six months of fiscal 2016 and fiscal 2017.

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

 

 

 

 

 

 

 

 

Acquisitions (1)

 

 

 

 

As Reported

 

 

 

Organic Sales